Summing Up The Week

Whenever there’s a key data point that doesn’t come until late in the week, the price action in markets can be downright anemic. While Bitcoin was rallying over $60K for the first time in years, the S&P 500 and the rest of equities languished until Thursday’s release of the Personal Consumption Expenditures (PCE) index, the Federal Reserve’s preferred gauge of inflation.

Here’s the news that moved the markets this week…

Market News

Q4 GDP revised slightly lower

On Wednesday, the U.S. government released the revised figures for the fourth quarter of 2023, showing the economy grew at an annual rate of 3.2 percent, down from the initial estimate of 3.3 percent released in January, reported Barron’s. 

“The update primarily reflected a downward revision to private inventory investment,” said the Department of Commerce in a report. But it added that this was partially offset by revisions upward to government and consumer spending.

The fact that economy grew at over 3% is still an incredibly good sign of a resilient U.S. consumer, and, with so much of the American economy relying on the consumer, we can also discern that the economy itself is likely remaining strong in the face of the Federal Reserve’s “higher for longer” policy.

PCE comes in as-expected, 0.4% rise in January

On Thursday, the Personal Consumption Expenditures index (PCE) showed costs increased 0.4% in January as expected, reported CNBC. Some market pundits were predicting that the PCE would come in hot just as CPI had earlier in February, so markets rallied slightly when the PCE did not show a marked increase in inflation.

Economists reflected on these expectations. “Overall, [the PCE] is meeting the expectations and some of the worst fears in the market weren’t met,” said Stephen Gallagher, chief U.S. economist at Societe Generale. “The key is we’re not seeing the broad nature of increases that we had been more fearful of.”

Next Week’s Gameplan

While there are some smaller reports coming out throughout thee week, the big news catalysts next week will likely be Federal Reserve Chairman Jerome Powell’s testimony to Congress on Thursday followed by the February nonfarm payroll report on Friday.

The smaller catalysts such as Factory orders, ISM services, ADP employment, and U.S. wholesale inventories sprinkled earlier in the week might move the markets a bit here or there, but I’m not expecting much until the last two days of the week.

In other words, next week might look a lot like last week when it comes to price action. However, I’ve always got my gameplan and will be eyeing opportunities to add to positions and to take profits.

I’ll see you back here next Friday, friends!

This Week in Play

Stay tuned for this week’s episodes of my two portfolios Investments in Play and Speculation in Play coming online later this weekend!

Crytpo Corner

Bitcoin Price Action

Bitcoin balloons over $64K!

Bitcoin positively exploded to the upside this week when it broke through $60,000. It seems that the $60K mark was the starting gun for everyone who was on the sidelines to put their money to work as Bitcoin didn’t stop rallying until it hit $64,100 on Wednesday.

The Bullish Case

This week’s move completely validated the Bull case. Even though, in equities, it’s not considered a new bull market until the previous all-time highs are broken, the unbelievable strength of the buying in Bitcoin is undeniable – this is a new bull market. Bulls are hoping for a pullback (yes, a pullback) so Bitcoin can consolidate and build more support levels, but the euphoria is everywhere in the space.

The Bearish Case

Believe it or not, some Bears continue to refuse to believe the rally, arguing that this the move is a false breakout and that Bitcoin will still test $30K before the end of 2024. Barring a Black Swan Event, I don’t see how that claim could play out.

I do agree that we might see a 20%-30% drawdown so Bitcoin can consolidate this mammoth move, maybe even a test of the Next Support of Last Resort currently around $42-45K. However, I don’t see the crypto pulling back to the $30K level again (even though I’m always ready for that possibility and lower).

Bitcoin Trade Update

TRADE RESET! +21.44% Gain in 2 Weeks, +557% Annualized

I made 3 buys between the last update and when Bitcoin rocketed on Monday with an average buying price of $51,135.20 (after fees). The buys lowered my per-coin cost -0.14% from $52,501.02 down to $52,425.73 and increased my allocation +5.69% from 2.933% to 3.100%.

When Bitcoin made its explosive rally this week, I decided it was time for me to once again Reset the Trade. I decided to reset the trade at $63,666, with an allocation of 2.233%

I locked in a gain of +21.44% on my trade which I opened less than two weeks ago on February 15, giving me an annualized gain of +557.45%.

What is “resetting the trade?”

Let’s say I have a trade on with $100,000 worth of Bitcoin at a $45,000 cost basis (2.02222222 BTC) and Bitcoin’s currently trading at $59,400, a gain of 32.00%.

If I reset my trade to a cost basis of $59,400, that means the trade would need 1.68350168 BTC on the network ($100,000 / $59,400).

This would leave me with a profit of 0.33872054 BTC from the previous trade to transfer to my cold wallet.

This would effectively “reset” the trade to $100,000 worth of Bitcoin at a cost basis of $59,400, and, in this case, no taxable event as I didn’t actually sell any – I kept all of the BTC I had originally purchased, just leaving some on network and some in cold storage.

Typically, when I reset my trades, I don’t want the full allocation, so I’ll actually sell some to reduce my BTC to what I feel comfortable starting with. So, with the $100,000 example, if I wanted it to be $50,000, I would sell $50,000 worth of BTC at $59,400 (my new cost basis) and that would be a taxable event, but not for the full $100,000 amount of the trade, just the $50,000 worth that I sold.

By resetting the trade, it does mean that if I ever do sell the Bitcoin I hold in cold storage (which I never plan to), any BTC I sell would be entirely taxable as a long capital gain since I had already taken out the initial cost; I would be selling 100% profit.

*New Bitcoin Trade*

Current Allocation: 2.267% (+1.52% since Start of Trade)
Current Per-Coin Price: $63,616.92 (-0.08% since Start of Trade)
Current Profit/Loss Status: -2.75% (*New Trade*)

With Bitcoin’s rally being so profound, I wanted to ensure that I could start adding back to my allocation quickly without having to wait for Bitcoin to sell off too much. So, yes, I have an extremely high starting per-coin price at $63,666.00, however my allocation is so low that I believe I’ll be able to manage the trade with little difficulty.

On Thursday, Bitcoin pulled back and triggered my first buy order which filled at $60,496.07. The small buy lowered my per-share cost just -0.077% from $63,666.00 to $63,616.92 and added +1.52% to my allocation, raising it to 2.267% from 2.233%.

Bitcoin Buying Targets

Using Moving Averages and supporting trend-lines as guides, here is my plan for my next ten (10) buying quantities and prices:

0.027% @ $59.464
0.027% @ $58,057
0.027% @ $56,711
0.027% @ $55,476
0.027% @ $54,013
0.027% @ $52,751
0.190% @ $51,460
0.141% @ $50,832
0.136% @ $50,260
0.277% @ $49,183

Not Your Keys, Not Your Crypto…

In light of brokerage failures in 2022, I no longer keep any of my crypto on an exchange and I only keep enough USD on the exchanges I use to execute my next few buys. I use multiple cold wallets from the brands Ledger and Trezor to hold my crypto (click the links to access the direct sites, and I receive no affiliate benefits from these links).

Additionally, I have now divided my allocated USD between two different exchanges – Gemini and Coinbase – in case one (or both) becomes insolvent. Disclaimer: We both receive a bonus if you use my Gemini referral link to open an account.

I do not trust anyone in the space, even with Coinbase (COIN) being publicly traded (and one of my own Investments in Play positions).

No price target is unrealistic in the cryptocurrency space – Bullish or Bearish.

While traditional stock market investors and traders may think the price targets in the cryptocurrency space are outlandish due to the incredible spread (possible moves include drops of -90% or more and gains of +1000% or more), Bitcoin has demonstrated that, more than any speculative asset, its price is capable of doing anything.

Here are some of Bitcoin’s price movements over the past couple of years:

• In 2017, Bitcoin rose +2,707% from its January low of $734.64 to make an all-time high of $19,891.99 in December.
• Then, Bitcoin crashed nearly -85% from its high to a December 2018 low of $3128.89.
• In the first half of 2019, Bitcoin rallied +343% to $13,868.44.
• In December, Bitcoin crashed -54% to a low of $6430.00 in December 2019.
• In February 2020, Bitcoin rallied +64% to $10,522.51.
• In March , Bitcoin crashed nearly -63% to a low of $3858.00, mostly in 24 hours.
• Then, Bitcoin rallied +988% to a new all-time high of $41,986.37 in January 2021.
• Later in January 2021, Bitcoin dropped -32% to a low of $28,732.00.
• In February, Bitcoin rallied +103% to a new all-time high of $58,367.00.
• Later in February, Bitcoin dropped -26% to a low of $43,016.00.
• In April , Bitcoin rallied +51% to a new all-time high of $64,896.75.
• In June , Bitcoin crashed -56% to a low of $28,800.00.
• In November, Bitcoin rallied +140% to a new all-time high of $69,000.00.
• In November 2022, Bitcoin crashed -78% to a low of $15,460.00.
• In April 2023, Bitcoin rallied +101% to a high of $31,050.00.
• In June, Bitcoin dropped -20% to a low of $24,750.00
• In July, Bitcoin rallied +29% to a high of $31,862.21.
• In September, Bitcoin dropped -22% to a low of $24,900.00.
• In January 2024, Bitcoin rallied +97% to a high of $49,102.29.
• Later in January, Bitcoin dropped -22% to a low of $38,501.00.
• In February 2024, Bitcoin rallied +66% to a high of $64,100.00.

Where will Bitcoin go from here? Truly, anything is possible…

What if Bitcoin’s headed to zero?

DISCLAIMER: Anyone considering speculating in the crypto sector should only do so with funds they are prepared to lose completely. All interested individuals should consult a professional financial adviser to see if speculation is right for them. No Get Irked contributor is a financial professional of any kind.